5 Days Ago

Italian firm given nod on refinery design tender

Uganda is in the process of becoming an oil economy. The refinery will be key in the sector. PHOTO ERONIE KAMUKAMA

By FREDERIC MUSISI

In Summary

Critical stage. The oil refinery is a critical stage in Uganda’s drive to become an oil economy by at least 2023.

ADVERTISEMENT

ADVERTISEMENT

The Albertine Graben Refinery Consortium (AGRC), the venture which was tapped to design, finance, construct and maintain the proposed oil refinery in Hoima District, has given Italian firm, Saipem, a nod to commence the technical front-end engineering design (FEED) studies for the project.

According to the Saipem, the FEED study is valued at about Shs250b ($68m) and will mainly detail various technical feasibility aspects of the proposed refinery.

The study is expected to last about 17 months with a possible extension for the engineering, procurement, and construction (EPC) phase.

The development follows the project framework agreement signed in April between government and AGRC to design, finance, construct and maintain Uganda’s 60,000 barrels per day oil refinery.

The project framework agreement details the technical work stream, which includes the configuration, market, logistics and technical FEED, and financial work stream which includes the equity finance, equity, in-kind equity, cash, pre-finance, debt finance, lenders and the debt structure, which will lead to Final Investment Decision (FID).

The project agreement also details the legal workstream which includes, among others, crude oil supply agreement with the upstream oil companies—France’s Total E&P and China’s Cnooc, refined products supply sales agreement, Engineering Procurement and Construction (EPC), operation and maintenance, and a shareholders agreement.

Uganda’s stake in the refinery will be carried through the Uganda Refinery Holding Company (URHC), a subsidiary of Uganda National Oil Company (UNOC), which is mandated to manage the country’s commercial interests in the oil sector.Mr Peter Muliisa, the UNOC chief legal and corporate affairs officer, told Daily Monitor that AGRC “indicated from the beginning” that Saipem would handle the FEED work of the project.

The refinery is expected to be financed in a Public Private Partnership arrangement, with AGRC taking a 60 per cent stake, and UHRC taking 40 percent.

Kenya and Tanzania also offered to buy a 2.5 per cent and Tanzania 8 per cent stakes, respectively in Uganda’s 40 percent stake. Total E&P offered to buy a 10 per cent stake, which leaves government with roughly 19 per cent stake.

VIABLE VENTURESIn 2010 government hired Foster-Wheeler, a British engineering firm, to study the viability and feasibility of the refinery. The Foster-Wheeler report posited that the refinery is an economically viable investment with a net present value of $3.2b at a 10 per cent discount rate and an Internal Rate of Return of 33 per cent, despite opposition by oil companies and analysts.